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A Scenario about Debts from a Vehicle Accident

One example how debts from a vehicle accident, involving possible drunk driving, are handled in bankruptcy.  



Our last blog post made the point that if someone injures another person by driving while legally intoxicated, bankruptcy can’t write off the financial obligations for the injuries. Sounds pretty straightforward.

But let’s give you a scenario that shows how this works, and may not be quite that straightforward.

The Scenario

Two years ago you were in a vehicle accident, involving one other driver and her vehicle, no passengers. You drove fast through a stop sign without stopping, broadsiding the other vehicle on the driver’s side. Fortunately the point of impact was behind the driver, so she was significantly injured but not nearly as bad as she could have been. Even more fortunately there were no passengers in the back seats.

However you were quite badly hurt, requiring a couple surgeries and 6 months of rehabilitation.

Both vehicles were totaled. The other driver was driving a 2013 Mecedes-Benz S600, with a used blue book value of $85,000.

It happened at a rural intersection on a Saturday night while you were returning from a party. You’d had a number of drinks at the party but felt only slightly impaired as you’d left.

The police took long to arrive on the scene because of the accident’s remote location. By the time a state trooper arrived, you were quite sober and in shock. You showed no impairment so the trooper did not test your blood alcohol level.

You were found to be 100% at fault because you later admitted that you simply hadn’t noticed the stop sign.

You had vehicle insurance coverage but only to the minimum legal amounts.

Now 2 years later, both drivers have fully recovered. But you owe a lot of money. After insurance has paid up to the coverage limits, you owe as follows:

1. $170,000 in unpaid medical bills for yourself

2. $55,000 for her medical bills and related personal injuries

3. $85,000 for the other driver’s totaled Mercedes-Benz

Plus, you owe $95,000 in other debts because of not being able to work for many months while you recuperated.  You meet with a competent bankruptcy lawyer to get advice.

The Lawyer’s Advice

Because you know it’s smart to be honest and thorough with your lawyer, you tell her about your drinking before the accident. You show her the traffic citation for running the stop sign, with nothing about driving under the influence.

Your lawyer tells you that as long as you are never accused of being legally intoxicated in this accident, you will be able to discharge (legally write off) all three of the accident related debts.

The Three Accident-Related Debts

First, you can discharge (legally write off) your own $170,000 in medical bills regardless of issues of impairment.

Second, in bankruptcy you can’t discharge debts for another’s personal injuries resulting from you unlawfully operating a vehicle while intoxicated. See Section 523(a)(9) of the U.S. Bankruptcy Code. That could potentially pertain to the $55,000 you owe for the other driver’s medical and other related expenses.

Your blood alcohol content may or may not have been above the legal threshold. There is no hard evidence that you were impaired at the time of the accident. Given the lack of a blood alcohol test near the time of the accident, it would be quite difficult (although maybe not impossible) to find evidence showing that you were impaired.

If you ran the stop sign simply because you were tired or distracted, the debt would be discharged. Debts for personal injury resulting from negligence can be discharged in bankruptcy.

Your lawyer tells you that there is a very small chance that the other driver (or its insurance company or yours) would try to show that you were lawfully impaired at the time of the accident. Assuming there would be no such successful attempt, the $55,000 debt would be discharged.

Third, regarding the other driver’s $85,000 vehicle, the inability to discharge drunk driving debt applies only to debts related to personal injuries. It does not apply to claims against you for property damage, such as for the replacement of a vehicle. So here the $85,000 debt for the Mercedes-Benz would be discharged even if you were driving while unlawfully impaired.

The Bottom Line

Even though there’s some small risk that the bankruptcy discharge of the $55,000 personal injury debt could be challenged, that appears unlikely. So it would likely be discharged. The other two accident-related debts—for $170,000 and $85,000—would almost certainly be discharged in bankruptcy.

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